ROC Equity Partners, the group that used to be the captive funds of funds unit at Australia’s Macquarie Bank, will officially become an independent entity as of next month.
The deal, which saw the management team consisting of Michael Lukin, Andrew Savage and Shaw Ng spin out all the unit’s funds, equating to about $5 billion of assets under management, closed in June.
The team has since been operating as ROC, but it remains under a transitioning agreement with Macquarie that will end within the next month or two, Lukin, who was managing director at Macquarie, told Private Equity International.
“We’ve communicated with all our clients and the transfer process is going smoothly. For all intents and purposes the transition is going very well, I don’t think we’ve missed a beat in terms of the investment activity for our clients,” he explained.
“It has been a very seamless transition. I think there is a lot of excitement and enthusiasm in the team as a result.”
The spin-out comes at a time when banks globally have felt pressure to divest their alternative asset divisions due to regulatory constraints.
However, ROC’s main consideration when spinning off the unit was the increasing preference of institutional investors for boutique private equity firms versus captives in large institutions, due to a greater alignment of interests.
“A prime motivator for us was as we continue to internationalise our client base, that we felt there was an increasing preference from international investors for a boutique ownership model in private equity,” Lukin explained.
“The equity ownership and carry alignment of the boutique model is what investors in private equity are increasingly expecting and so for us, as we continue to grow the business, it was important to be able to replicate that model and ownership structure as the rest of the market moves that way as well.”
ROC now manages two Asia-Pacific funds of funds focusing on secondaries and co-investments, as well as Macquarie’s sixth Australia-focused fund of funds.
The firm is not changing its strategy and plans to raise new vehicles for the three respective strategies in the next 12 to 18 months, Lukin says, although as the investor base shifts in Australia he expects their client base will move towards self-managed superannuation clients rather than large institutional investors.
He expects ROC to continue focusing on co-investments and secondaries, as well as its fund of funds activities. However, it will not move into direct investing, as it doesn’t want to compete with its GP clients.
The firm maintains its commitment to the Asia-Pacific market outside of Australia, despite managing director Hugh Dyus not joining the spin-out due to differences of opinion with regards to the direction of the business, market sources told PEI.
Dyus, who has led the Australian investment bank’s Asia private equity operations from its Hong Kong office since April 2006, is staying with the team at ROC on a transitional basis until the end of 2014 to provide continuity for investors, one source close to the matter revealed earlier.
While there is a possibility he could be retained by ROC as an investment committee member or in an advisory capacity going forward, Dyus will not be participating in ROC as a shareholder or permanent investment professional, despite being a key member of the investment team while at Macquarie, according to the source.
Lukin declined to comment on Dyus' employment with the firm, but said that ROC has a team of six based in Hong Kong and Tokyo. Dyus also declined to to be interviewed for this story.